This is the question I get the most, by far….
People want to know how they should store their crypto…
This is a simple overview of the different kinds of “wallets” you can use, and it should help you make your decision and guide you to further research.
The primary types of wallets are software wallets and hardware wallets.
Software Wallets (Hot Wallets)
Software wallets, also known as hot wallets, are applications or software programs that store private keys on devices connected to the internet, like computers or smartphones. These wallets offer convenience and ease of access for regular transactions.
The primary advantage of software wallets is their accessibility, making them ideal for daily use and frequent trading. It’s similar to your money being in the bank, or your crypto being “in the cloud.” Access is just a matter of logging into your account.
Popular examples of software wallets include Coinbase, MetaMask, and Trust Wallet.
Upsides:
- Easy to use, set up, and access
- Convenient for everyday transactions
- Often free to use
Downsides:
- Vulnerable to online hacking and malware
- Private keys are stored on an internet-connected device, which can be a security risk
- If the wallet company shuts down, it is questionable what would happen to crypto stored there.
Hardware Wallets (Cold Wallets)
Hardware wallets, often referred to as cold wallets, are physical devices designed to securely store private keys offline. This type of wallet offers a significant security advantage over software wallets because it is immune to online hacking attempts, malware, and other cyber threats.
When you need to make a transaction, you connect the hardware wallet to a computer or mobile device with a cable, allowing it to sign transactions without exposing the private keys to the internet. This is analogous to having your cash in your pocket.
Popular examples include Ledger and Trezor.
Upsides:
- Highly secure as private keys are stored offline
- Immune to online hacking, malware, or corporate shutdowns
- Ideal for long-term storage of significant amounts of cryptocurrency
- Increase privacy
Downsides:
- More expensive than software wallets
- Less convenient for frequent transactions
- If you lose it or it’s stolen, it’s gone
The Bottom Line
As is generally true, the more convenient solution is less secure, and the more secure solution is less convenient. My personal recommendation is to have both…
Using a hardware wallet is generally considered the best practice for long-term storage of significant amounts of cryptocurrency. They are much more secure and private than software wallets.
That said, if you plan on trading smaller amounts and doing it often, or you want the flexibility to trade on the go from your mobile device, you will probably want to do that with a software wallet.
Then, when those smaller amounts get bigger, you can move them or some portion of them to your hardware wallet. Just don’t lose it. 😉
I hope this helps! Let me know what other questions you have!
-Michael
About the Author
Michael Hearne
About Decentral Publishing
Decentral Publishing is dedicated to producing content through our blog, eBooks, and docu-series to help our readers deepen their knowledge of cryptocurrency and related topics. Do you have a fresh perspective or any other topics worth discussing? Keep the conversation going with us online at: Facebook, Twitter, Instagram, and LinkedIn.
